The Ethereum 2.0 Beacon Chain launched in December, and network validators are making a tidy sum securing the network. But is it the best offer going?
So far, a significant portion of the total Ethereum supply is locked in the deposit contract.
According to Flipside Crypto, a business intelligence firm for blockchain organizations, validators are earning 0.002792 Ether per day. That’s approximately $1.69, according to the current market price.
Crunching the Numbers
To qualify for a validator node, a user must stake 32 ETH in the staking contract. So, assuming a node has 32 ETH and is receiving 0.002792 Ether per day as its reward, it is generating 0.008725% in daily interest.
When compounded across a year, the annual return rate equals approximately 3.2% for each node (holding 32 ETH minimum).
Celsius, a lending platform that combines centralized and decentralized loans, currently offers a 5.5% yearly interest rate on ETH. The platform offers a 7.21% rate if you agree to receive your interest in its native CEL cryptocurrency.
At the current rate, if a user lends 32 ETH on Celsius rather than the Ethereum 2.0 chain, the user would theoretically make an additional 0.736 ETH, worth $445 at the current Ether price.
In addition, Ethereum 2.0 users will not be able to access their staked funds until phase 2 of the migration occurs. This could take an additional two years, according to MyEtherWallet CEO Kosala Hemachandra.
What is Ethereum 2.0?
With ETH 2.0, Ethereum has moved to a Proof-of-Stake (PoS) verification method that allows users to secure the network without advanced computing hardware.
With PoW, users need to dedicate computing power to validate transactions. In the case of PoS, users have to stake their currency on the platform for validation.
Users who falsely validate will face a penalty. The user can lose a portion or more of their initial stake. Pro Ethereum pundits argue that PoS verification is a step in the right direction for the project and its co-founder Vitalik Buterin.
This new verification mechanism intends to make transactions faster and ultimately cheaper for the end-user.